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[2023] ZAFSHC 282
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Minister of Human Settlements and Another v Mminathoko Trading 117 CC (3803/2021) [2023] ZAFSHC 282 (18 July 2023)
IN THE HIGH COURT
OF SOUTH AFRICA
FREE STATE
DIVISION, BLOEMFONTEIN
Case Number 3803/2021
In the matter of:
MINISTER
OF HUMAN SETTLEMENTS
FIRST
APPLICANT
MEC
FOR DEPARTMENT OF HUMAN
SETTLEMENTS,
FREE STATE
SECOND
APPLICANT
And
MMINATHOKO
TRADING 117 CC
RESPONDENT
CORAM: NAIDOO, J
HEARD ON: 23 FEBRUARY
2023
DELIVERED ON: 18
JULY 2023
JUDGMENT - APPLICATION
FOR RESCISSION OF JUDGMENT
[1] This is an
application for rescission of a judgment granted against the
applicants, who are the first and second defendants
in the main
action, in which the respondent sued the applicants for payment of
monies due to it for services rendered in terms
of a contract entered
into between the second applicant and the respondent. The application
is opposed by the respondent. For convenience,
I shall refer the
first applicant as ‘the Minister’ or ‘first
applicant’, the second applicant as ‘the
MEC’ or
‘second applicant’ or collectively as ‘the
applicants’, and the respondent as ‘MMinathoko’
or
the ‘respondent’. Ms JMA Engelbrecht represented the
applicants, and Adv HJ Van Der Merwe represented the respondent.
[2] The applicants sought
an order in the following terms:
“
1 That the
judgment granted against the defendants on 9 June 2022 be rescinded
in terms of the rule (sic) of the Honourable Court;
2 That the leave be
granted to the defendants to continue their defence of the claim.
3 That the plaintiff’s
legal representative the cost this application (sic) on attorney and
own client scale”.
[3] As I indicated, the
MEC and MMinathoko entered into a contract in February 2018 for the
construction of houses in Bethulie in
the Free State. The work was
done and invoices submitted to the MEC, who failed to pay. MMinathoko
sent a letter of demand to the
MEC and when it did not receive
payment, it issued summons against the MEC and the Minister. The MEC
does not dispute that it owed
the amount of One Million Two Hundred
and Fifty Thousand One Hundred and Fifteen Rand and Seventy Two Cents
(R1 250 115.72
) to MMinathoko, and communicated as much to
the latter. The MEC however, alleges that on 24 August 2021 he
indicated that he owed
the money to MMinathoko (without saying to
whom this indication was made) but that he had received a notice from
the South African
Revenue Service (SARS) indicating that MMinathoko
owed SARS an amount of R1 367 088.39, and that the MEC, on
account of owing
or holding monies due to MMinathoko, was appointed
in terms of the Tax Administration Act (28 of 2011 as amended), to
pay such
money to SARS. The MEC did not mention when the notice from
SARS was received.
[4] The MEC indicates
that the amount of R1 057 313.14 was paid to SARS on 25
March 2022. SARS confirmed that it received
payment on 29 March 2022.
MMinathoko pointed out that the notice from SARS is dated 7 June 2016
and therefore denies that the notice
was received by the MEC in
August 2021. In addition, MMinathoko points out discrepancies in the
reference numbers reflected in
the section 179 notice and the proof
of payment tendered by the MEC. In response to the allegation that
the section 179 notice
has lapsed, the MEC points out that once a
notice is issued, it remains valid until it is withdrawn by SARS. The
notice in this
matter was not withdrawn and hence remains valid.
[5] The relevant
section of the Tax Administration Act is section 179. It is perhaps
useful to set out the provisions of
the entire section in order to
contextualise the case pleaded by the MEC:
179
Liability of third party appointed to satisfy tax debts
(1)
A senior SARS official may authorise the
issue of a notice to a person who holds or owes or will hold or owe
any money, including
a pension, salary, wage or other remuneration,
for or to a taxpayer, requiring the person to pay the money to SARS
in satisfaction
of the taxpayer's outstanding tax debt.
(2)
A person that is unable to comply with a
requirement of the notice, must advise the senior SARS official of
the reasons for the
inability to comply within the period specified
in the notice and the official may withdraw or amend the notice as is
appropriate
under the circumstances.
(3)
A person receiving the notice must pay
the money in accordance with the notice and, if the person parts with
the money contrary
to the notice, the person is personally liable for
the money.
(4)
SARS may, on request by a person
affected by the notice, amend the notice to extend the period over
which the amount must be paid
to SARS, to allow the taxpayer to pay
the basic living expenses of the taxpayer and his or her dependants.
(5)
SARS may only issue the notice referred
to in subsection (1) after delivery to the tax debtor of a final
demand for payment which
must be delivered at the latest 10 business
days before the issue of the notice, which demand must set out the
recovery steps that
SARS may take if the tax debt is not paid and the
available debt relief mechanisms under this Act, including, in
respect of recovery
steps that may be taken under this section-
(a)
if the tax debtor is a natural
person, that the tax debtor may within five
business
days of receiving the demand apply to SARS for a reduction of the
amount to be paid to SARS under subsection (1), based
on the basic
living expenses of the tax debtor and his or her dependants; and
(b)
if the tax debtor is not a natural
person, that the tax debtor may within five business days of
receiving the demand apply to SARS
for a reduction of the amount to
be paid to SARS under subsection (1), based on serious financial
hardship.
(6)
SARS need not issue a final demand under
subsection (5) if a senior SARS official is satisfied that to do so
would prejudice the
collection of the tax debt.
[6] The MEC’s case
is that he does not dispute that he owed money to MMinathoko, but
that he was obliged to pay that money
over to SARS as a result of the
notice issued in terms of section 179, failing which his Department
would be held personally liable
to SARS for payment of that money. In
addition, the notice directed him not to disclose the content of
thereof to any other party,
except to give effect to the notice.
MMinathoko denies that the MEC was instructed not to disclose the
content of the notice to
it, alleging in any event, that the final
demand for payment in terms of the Tax Administration Act was never
served on it. Had
the MEC disclosed the notice, it would have
challenged the issue thereof. It is furthermore not in dispute that a
Notice of Bar
was served on the MEC after a Notice to Defend the
action was served on MMinathoko
[7] MMinathoko’s
attorney contends that the MEC has not made out a case for
rescission, in that he has failed to show that
his default is not
wilful and has not shown that he has a bona fide defence to the
claim. A letter of demand was sent to the applicants
on 30 June 2021,
to which the State Attorney responded and advised that the letter of
demand was forwarded to the MEC and that
they were awaiting
instructions. According to the Sheriff’s returns of service,
the summons in this matter was served on
the applicants on 19 August
2021. The MEC’s attorney, Ms Engelbrecht alleges in the
Founding Affidavit that the summons was
received on 30 August 2021,
with which MMinathoko agrees in its Answering Affidavit. The
applicants’ Notice of Intention
to Defend was served on
MMinathoko’s attorney on 17 September 2021. The latter served a
Notice of Bar on the State Attorney,
representing the MEC, on
7 December 2021.
[8] As mentioned
earlier, the MEC indicated to someone on 24 August 2021 that he
acknowledges liability to MMinathoko for
the amount claimed, but that
he had received a notice from SARS appointing “them” as
their agent and directing them
not to disclose the content of the
notice to anyone. It is wholly unclear when this notice from SARS was
received, as the notice
is dated 7 June 2016. If 24 August 2021 is
meant to be taken as the date that the SARS notice was received, then
the MEC filed
a Notice of Intention to defend knowing that the money
he owed MMinathoko will not be paid to it but to SARS. He said
nothing at
that stage to the latter, but then informed the State
Attorney on 28 September 2021 that payment could not be made as
MMinathoko’s
invoices were outdated. Ms Engelbrecht called
MMinathoko and requested updated invoices, which were duly furnished
under cover
of a letter dated 6 October 2023. No payment was made,
but on 20 October 2021, Ms Engelbrecht sent a letter to MMinathoko
requesting
that the exchange of pleadings be held over until 30
November 2021.
[9] No response was
received from MMinathoko, but on 7 December 2021, the Notice of Bar
referred to earlier was served on the State
Attorney’s office.
It seems there was no action from the MEC’s side between 30
November 2021 and 7 December 2021. Two
weeks later Ms Engelbrecht
communicated with MMinathoko’s attorneys requesting an
extension until 21 January 2022, as most
of the (MEC’s)
Departmental officials were on leave. There is no evidence of a
response by MMinathoko’s attorneys to
this request. Payment in
the amount of R1 057 313.14 was made by the MEC to SARS on
25 March 2022, and a letter was sent
on 3 May 2022 to MMinathoko’s
attorneys informing them of this payment and requesting them to
withdraw the action. A copy
of the Notice from SARS was attached to
the letter.
[10] In response to the
MEC’s letter of 3 May 2022, MMinathoko’s attorneys served
a notice in terms of Rule 31(5) on
the Office of the State Attorney,
on 31 May 2022. There was no response in respect thereof and
Mminathoko took judgment by default
for the full amount claimed in
the summons (R1 250 115.72) against both applicants on 9
June 2022. Ms Engelbrecht discovered
on 1 July 2022 that judgment was
taken by default. The application for rescission of judgment was
issued on 21 July 2022.
[11] Uniform Rule
31(2)(b) is relevant to this matter and provides:
(2)(a) ….
(b) A
defendant may within 20 days after acquiring knowledge of such
judgment apply to court upon notice to the plaintiff to
set aside
such judgment and the court may, upon good cause shown, set aside the
default judgment on such terms as it deems fit.
The
court has a wide discretion in evaluating and determining what
constitutes “good cause”. Over the years our courts
have
expressed the view that an attempt to lay down an exhaustive
definition of what constitutes good cause, would hamper the ability
of a court to exercise the discretion it has in making that
determination.
In
the much quoted matter of
Grant v
Plumbers (Pty) Ltd
1949(2)
SA 470 (O)
, the court set out the
requirements for an application for rescission as follows:
(a) He
(ie the applicant) must give a reasonable explanation of his default.
If it appears that his default was wilful or that
it was due to gross
negligence the Court should not come to his assistance.
(b)
His application must be bona fide and
not made with the intention of merely delaying plaintiff’s
claim.
(c)
He must show that he has a bona fide
defence to plaintiff’s claim. It is sufficient if he makes out
a prima facie defence
in the sense of setting out averments which, if
established at the trial, would entitle him to the relief asked for.
He need not
deal fully with the merits of the case and produce
evidence that the probabilities are actually in his favour.”
The Grant matter has been
followed in a long line of cases from 1979 to present times. The
guidelines set out in Grant have become
well established in our law.
[12] With regard to the
explanation for failure to comply timeously with the Rules of Court
in seeking rescission, it is equally
well settled in our law that the
applicant is required to give a full explanation for his default.
MMinathoko alleges that the
applicants’ default is wilful. In
Silber v Ozen Wholesalers (Pty)
Ltd
1954(2)SA
345
, another
locus
classicus
,
followed and cited with approval in numerous cases over the last 70
years, the court held that:
“
Before
a person can be said to be in wilful default, the following elements
must be shown:
(a)knowledge
that the action is being brought against him;
(b)a
deliberate refraining from entering appearance, though free to do so;
and
(c)a
certain mental attitude towards the consequences of the default.
[13] It has been held
that a person is in wilful default if he had full knowledge of the
circumstances and the consequences of his
default, and freely and
consciously takes the decision not to act. The respondent (in this
case MMinathoko) bears the onus to show
that the default was wilful.
It has also been held that all three elements, set out in the
Silber
case, must be present before a person can be said to be in wilful
default. In this matter, with regard to the first two elements,
the
MEC had knowledge of the action, and entered an appearance to defend
same, so the second element is not applicable.
[14] With regard to the
third element, it is clear that there was communication and
correspondence between the parties regarding
the future conduct of
the matter. The Notice of Bar was served on 7 December 2021. Ms
Engelbrecht, on behalf of the MEC asked MMInathoko’s
attorney,
on 22 December 2021, for the matter to stand over until 21 January
2022, but received no response. It seems neither party
did anything
in the ensuing two and a half months to three months. The MEC paid
SARS on 25 March 2022, and informed the respondent’s
attorney
of such payment on 3 May 2022. It was only after that date that the
respondent’s attorney reacted and served the
Notice in terms of
Rule 31(5). Ms Engelbrecht advised that when the notice was served,
she was on sick leave and the matter was
not attended to by anyone in
her office. This was not disputed by the respondent.
[15] It hardly lies in
the mouth of the respondent to now claim that the MEC was aware that
he was under Bar and he should have
applied to court for upliftment
of the Bar and that he should have filed his plea indicating that he
did not owe the money. The
respondent itself was tardy in prosecuting
the matter swiftly and expeditiously. It did not respond to the
request to stand the
matter over, creating in Ms Engelbrecht’s
mind the impression that they had in fact consented. This goes to the
third element
that the applicant must have failed to act, knowing
full well the consequences of such inaction. I am constrained to find
that
such a wilful state of mind existed in Ms Engelbrecht, which can
also be imputed to the MEC. The respondent has failed to discharge
the onus on it to show wilful default on the part of the MEC
[16] It is so that the
explanations given by Ms Engelbrecht are not as complete as they
should be, but the court has the discretion
to traverse the merits,
to some extent, in order to assess the prospects of success. If an
application for rescission depended
only on the explanation for the
non-compliance with the timeframes set out in the Rules, the
applicant would have fallen short
of the required standard, as his
attorney’s explanation for the delay is not one that is
detailed or one that covers the
entire period of the delay. Ms
Engelbrecht’s explanations are very general in nature, lacking
the detail that is required
in applications such as this. Such
explanation is, however, one of the factors to be considered by the
court in deciding whether
to grant rescission of the judgment. This
court is obliged to consider the reasonableness and adequacy of the
explanation for the
delay, in conjunction with other factors in
making an order that would achieve fairness to both parties.
[17] Prospects of success
in the action is a very important factor in determining whether
rescission should be granted in the present
matter. It is trite that
the applicant will have to make out a case for rescission. The
applicant was directed by SARS to pay to
it monies that the applicant
was holding and which it owed the respondent. The MEC was legally
obliged to pay that money to SARS,
so the respondent’s argument
that the applicant was not obliged to refrain from disclosing the
notice to the respondent is
without merit. The
law is very clear that if
the applicant failed or refused to pay the amount to SARS, it would
become personally liable to pay the
amount owed by the respondent to
SARS. With regard to the balance, which the respondent claims is owed
to it, the applicant alleges
that it does not in fact owe any monies
to the respondent, and that the payment to SARS extinguished its
liability to the respondent.
This, in my view, is an arguable case
and if argued in a trial court, may well succeed. The applicant,
would also then have the
opportunity to substantiate its case that it
does not owe the respondent any money. For its part, the respondent
would then have
the opportunity of properly substantiating its case
that the applicant owes it the money it claims.
[18] The applicant also
alleges that there has been a misjoinder of the first applicant, the
Minister. This is also an important
aspect from the point of view of
costs. The court is furthermore, alive to the fact that the public
purse is implicated in this
matter, and must do what is fair and just
in order to protect such public funds. A trial court will be in the
best position to
interrogate the evidence, evaluate it and make an
appropriate ruling. I am. Therefore, of the view that the interests
of justice,
as well as the interests of both parties require the
issues in this matter to be fully ventilated. The applicant has
set
out averments, which if proved at the trial, entitle him to the
relief he seeks
[19] With regard to
costs, the trial court, after hearing argument on the matter, will be
in a better position to make a just and
appropriate award.
[20] In the circumstances
I make the following order:
20.1 The
application for rescission is granted;
20.2 The applicants
are directed to file their plea within thirty (30) days of the date
of this order;
20.3 Costs stand
over for later adjudication.
S NAIDOO J
On
Behalf of the Applicants:
Ms
JMA Engelbrecht
Instructed
by:
State
Attorney
11
th
Floor Fedsure Building
49
Charlotte Maxeke Street
Bloemfontein
(Ref:
584/202100760/P15M)
On
Behalf of the Respondent:
Adv
HJ Van Der Merwe
Instructed
by:
Esterhuyze
Attorneys
Kroonstad
c/o
Badenhorst Attorneys
15
Groenvlei Avenue
Groenvlei
Bloemfontein
(Ref:
PHH Badenhorst/GRI1/0001)